On Nov. 28 for instance, the Chicago U.S. cash index price was $47.90 per hundredweight, while December futures were $50.65.

The cash price has fallen from almost $66 at Sept. 1 in a slow grind downward to present prices.

However, December futures prices fell from $57 per cwt. on Sept. 1 to just above $40 on Oct. 19, then staged a rally back up to almost $51.

Fulton suspects the rally is more technical than fundamental and that the cash market is a better indicator of where things are at.

“I’m not near as optimistic about the next three weeks as what the market is,” said Fulton.

“I still don’t think we’ve seen the cash market lows.”

He expects to see them by the middle of December.

The fourth quarter of every year is always of grave concern for hog producers because that’s when pig supplies tend to grow and packer capacity gets squeezed. In 1998, more hogs than shackles on which to hang them caused prices to collapse, ruining many farmers.

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Usually, the impact is less severe, but about every fourth year, the fourth quarter is a problem at the end of a herd expansion cycle.

This year, many analysts were watching the fourth quarter closely because of this risk and prices have indeed fallen. December futures were at $67 in July, so dropping to $50 is significant.

But the decline could be worse if the packing capacity becomes overwhelmed, which recent slaughter numbers suggest is close to happening.

To this point, packing plants have kept up with the hog flow, with strong profitability encouraging them to kill all the pigs they can.

“It’s really impressive the number of hogs we’ve churned through,” said Fulton.

But with a maximum U.S. capacity of about 2.53 million pigs per week almost reached, problems could arise with any disruption. Fortunately for farmers, Fulton thinks cash prices will likely stay above $40, since excess supplies are unlikely to substantially exceed capacity and packers are keen to continue making money.

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Slaughter is at record levels, with almost six percent more pigs coming to market than a year ago. However, the pigs tend to be a few pounds lighter, so the amount of extra pork isn’t that great.

Fulton said the packer squeeze is happening, but even though prices will likely be depressed more and there are more weeks to go, hog producers will likely come through this period OK.

Next year shouldn’t see such a squeeze, because 30,000 to 40,000 head extra slaughter capacity is coming on-line. The real challenge will be moving the meat, which is presently being sold at high prices but is testing U.S. consumers.

“Maybe the issue is on the pork side,” said Fulton.

“We’ve got to find a way to move all of this pork, especially when the U.S. dollar is strong relative to the export markets.”